28 October 2010 | Sue Hornibrook

Would your suppliers go above and beyond the call of duty for you should the need arise? To ensure they do so, you need to treat them fairly, says Sue Hornibrook

How often have you heard the phrase: “It’s not just the money – it’s the way I’ve been treated” from disgruntled employees? Are such employees likely to feel motivated, committed and willing to “go the extra mile” for their employer? Or are they likely to feel angry and frustrated, leading them to withhold their efforts, retaliate and eventually leave the organisation?

People behave in response to their perceptions of how fairly they have been treated, not only in terms of pay and other rewards but also in the way an organisation’s policies and procedures are set by the firm and implemented by managers. Employees who feel they are treated equitably and with respect, given accurate information, and involved and consulted when decisions are made, are much more likely to go beyond the call of duty in terms of effort and contribution to the organisation’s performance.

Suppliers are no different in this area. The implementation of a firm’s procurement strategy is seen as critical to successful supply chain performance. But purchasing professionals, and their interpersonal relationships with account managers, are key to the success or otherwise of those policies and procedures.

Our experience shows that suppliers who have been asked to give their opinions on their relationships with buying firms will often focus on how they as individuals have been treated by buyers, rather than on firm level prices, profits and financial issues. Suppliers who feel they have been consulted, involved in decisions and treated with respect are far more likely to take actions over and above those that are formally expected within the terms of supply, such as technological innovation, new product development and assisting with crisis management. On the other hand, suppliers who feel they have been treated rudely by buyers, or have had policies and procedures imposed upon them, are more likely to retaliate by not investing in research and development, by offering exclusive and new products to other customers, or even by withdrawing from the relationship.

These tendencies have implications for both firms and individual procurement professionals. At the organisational level, corporate codes of conduct should be reviewed to ensure the fair treatment of suppliers; and firm incentives and performance measurements should be aligned with long-term strategic performance and not short-term metrics such as cost. In addition, firm procedures and policies should be informed by suppliers’ perceptions of their treatment. One way to do this is to independently seek, and act upon, the views of your suppliers in terms of their perceptions of fairness, using either anonymous third-party surveys or supplier workshops.

At the individual level, procurement professionals should improve their contextual knowledge of the supplying product and industry, and develop their interpersonal and, particularly, customer service skills. It is the buying firm’s rules, terms, standards and procedures, and the way they are implemented by individual procurement professionals, that will influence whether suppliers are willing to go that extra mile

Key Points

• Review codes of conduct to ensure fair treatment of suppliers
• Check that procedures and policies are informed by suppliers’ perceptions of their treatment
• Improve contextual knowledge and interpersonal skills

* Sue Hornibrook, Centre for Value Chain Research, Kent Business School